Organisations with a social purpose are “constrained by the shape of financial services in the UK”, warns the Commission on Big Society as it recommends the government encourage banks to act as the “engine for social action”, in its report launched today.
Powerful people, responsible society, published by the Commission which was set up in December by Acevo, says it is “time for a step-change” in the degree to which British banks engage with communities and criticised the banking sector for not going far enough to support community action.
The Project Merlin agreement "does not constitute the kind of fundamental shift in attitude and behaviour which we would like to see from the banking sector in terms of their support for community action" says the report, calling on banks to "reconnect with the communities they operate in, rely on, and in theory serve".
“The Project Merlin talks were a historic opportunity for the banks to do that – but they did not seize it. Their failure to do so is particularly disappointing given the vast sums of public money that have been spent on keeping them afloat. It therefore falls to the government to use a variety of measures to ‘nudge’ the UK’s banking sector towards greater social responsibility,” it adds.
The Commission therefore calls for a new US-style regulatory framework to encourage banks to lend to financially excluded communities.
Supporting the Social Investment Taxforce’s analysis that voluntary transparency in the banking sector has failed, the Commission looks to the Community Reinvestment Act (CRA) which was launched in the United States in 1977 as a measure of enforced transparency through a CRA rating system that rewards social investors. The system has led to specific community-focus units and partnerships with social investors, advises the Commission.
Further, the Commission calls for a commitment from the banks to reivest a minimum of 1 per cent pre-tax profit for social good. A poll of 2, 500 UK adults taken for the report found that 74 per cent of UK adults believed if the banks made the 1 per cent commitment to the community sector rather than their shareholders, it would do a lot to restore the banks’ image.
